The film begins with the great white shark moving throughout the ocean as it starts to follow an unsuspecting team of water skiers. The driver, Richie, stalls the boat and manages to get it going again before the shark can attack anyone. The shark follows the water skiers into the park and throws the gate off its rails while it is closing. Meanwhile, Florida announces the opening of SeaWorld's new underwater tunnels.

Katherine "Kay" Morgan (Bess Armstrong), the senior marine biologist, and her assistants wonder why the dolphins, Cindy and Sandy, are so afraid of leaving their dolphin pen. Shelby Overman (Harry Grant), one of the mechanics, dives into the water to repair and secure the gates. He is attacked by a shark and killed, leaving only his severed right arm. Additionally that night, two men in diving equipment sneak into the park in a small inflatable boat to steal coral they intend to sell. One slips into the water quietly, but is taken by the shark, leaving only his diving mask drifting in the water. The other man is pulled into the water also; then something sinks the inflatable.

The next day, Michael Brody (Dennis Quaid) and Kay are informed of Overman's disappearance. They go down in a submarine to look in the tunnels to find Overman's body. Kay suggests the filtration pipe but Mike says that the current is too strong and that it flows into the lagoon every hour. They decide to go into a piece of scenery, the Spanish Galleon, despite the two dolphins attempting to keep them out. As they search the Spanish Galleon they encounter a small great white shark. The dolphins rescue Kay and Mike but the shark escapes back into the park.

The news of the shark is not believed by Calvin Bouchard (Louis Gossett, Jr.), the SeaWorld park manager, although the news is exciting to his hunter friend, Phillip FitzRoyce (Simon MacCorkindale), who states his intention to kill the shark on network television. Kay protests, arguing that while killing the shark would be good for one headline, capturing and keeping a great white shark alive in captivity would guarantee TV crews and money constantly rolling into SeaWorld. The baby shark is captured and Kay and her staff nurse it to health. Shockingly, the young great white actually allows Kay to touch him and give him water with a garden hose without trying to attack her. However, Calvin, desperate to start the money rolling in immediately, orders it moved to an exhibit as "the first great white in captivity". He ignores Kay's advice to wait until she feels the shark is ready, and puts it on display. As is typical of great whites in captivity, the baby shark kills itself despite Kay diving into the water with her assistant, Dan, in a desperate attempt to save it. She angrily tells FitzRoyce that he can "Go ahead. Photograph it."

At the underwater tunnel, a girl is terrified when she sees part of Overman's corpse bob up to a window. Forcing Mike and a paramedic to let her review Overman's corpse, Kay realises that the shark that killed him must be the young shark's mother, and that since Overman was killed inside the park, the mother shark must also be inside the park; the shape of the bite shows that the shark's mouth must be about 3 feet wide and thus the shark about 35 feet long. She captures the attention of FitzRoyce, but she cannot convince Calvin until the enormous shark herself shows up at the window of their underwater cafe, terrifying the customers. Flushed out from her refuge inside the filtration pipe, the shark begins to wreak havoc on the park and attacks water skier Kelly Ann Bukowski (Lea Thompson) and Sean Brody (John Putch). The shark injures Kelly in the left leg and leaves. Sean is unharmed but the shark causes a leak that nearly drowns everyone in the underwater tunnel. FitzRoyce and his assistant Jack (P. H. Moriarty) go down to the filtration pipe in an attempt to trap the shark back inside to kill it. FitzRoyce leads the shark into the pipe but his lifeline rope snaps and the shark attacks him. FitzRoyce grabs a grenade and prepares to use it, but before he can get his other hand to the grenade to pull its safety pin he is crushed and chewed, in the shark's mouth as it swallows him fins first, cylinder and all as far as it can.

Hearing the shark has been lured into the pipe, Michael goes down to repair the underwater tunnel so the technicians can restore air pressure and drain the water, with Kay to watch his back. He welds the repair piece and Calvin orders the pump shut down to suffocate the shark, despite the pleas of his far more sensible technicians, who would rather blow it up. All shutting the pump down does is let her break free from the pipe and attack Mike and Kay. They escape thanks to help from the two dolphins, who counter-attack the shark to briefly distract her to Mike and Kay can get away. Mike and Kay make their way back to the control room with Calvin and the technicians, but the shark appears in front of the window and smashes its way through the glass and floods the room. Calvin manages to swim out and the unnamed female technician but the other technician, his nephew, is killed in the process. Mike notices FitzRoyce's corpse still in the shark's throat with the grenade in his hand trailing into its mouth, and uses a bent pole to pull the grenade's pin, killing the shark and then its jaws float throughout the blood and water and are shown to the viewer in 3-D. In the aftermath, Mike and Kay swim to the surface. Mike is happy that Calvin and the girl got away, but Kay is concerned about her dolphins. Cindy arrives, but for several seconds, there is no Sandy. Suddenly, he reveals himself, performing the jump he had refused to perform for Kay for the entire movie.